Perverse Incentives: Transit fares, parking rates, and fringe benefits.

We are doing it wrong.

Global CO2 concentrations are regularly above 400 parts per million.  Drought and famine caused by climate change are destabilizing our political environment as well as displacing and killing millions.  Driving directly kills more than 30,000 Americans a year (just barely less than firearms).  According to MIT, air pollution from driving kills more than 50,000 additional Americans every year.

Financially, the toll of automobile dependency is no less severe.  In 2014, federal, state, and local governments spent $165,000,000,000 (165 billion) on roads, with much of that money being spent on construction of new roadways while our existing roads decay.

In the face of these (and many, many other) downsides, we should be using every tool available to discourage unnecessary driving. but we’re not.  In fact, not only does the underlying policy of the federal government not discourage driving (even alone), it encourages it.  Locally, Portland is trying harder than many cities, but we still maintain a bevy of policies that subsidize and prioritize the most wasteful and dangerous mode of transportation over the rest.

The Pyramid of Convenience

Graph showing differences in cost between various modes, ranked by convenience and time of trip.

Infographic Courtesy of Charlie Tso






Being driven in a private-for-hire vehicle from your location to your destination is the most convenient and, likely, pleasant way to travel in the city.  As such it’s quite expensive.  To take a taxi or a Lyft from inner SE Portland (4 miles out) to downtown will cost upwards of $12 to $15 each way.  A two way trip for a dinner and a movie will cost a single traveller $30 in transportation.  Additional travelers add to the economy, however, and taking a friend along doesn’t double the charge.  Nevertheless, the cost is rather high and reflects the convenience.

The second most convenient (and therefore valuable) mode is driving yourself or being driven with a friend and parking on street near your destination.  The same 4 mile round trip will cost roughly $4 in vehicle wear, gas, etc.  Street parking in downtown Portland for a 3 hour stay will range anywhere from $0.00 (after 7PM) to $6.00.   Additional passengers add negligible cost.  A couple going on a date from 6-9PM will spend ~$6.00 on transportation.

Slightly less convenient is driving yourself and parking in a city operated Smart Park.  You may spend a little less time driving around, but you will have to travel farther to your destination.  Things get a little interesting here, however, because Smart Park charges 24 hours, with a maximum $5 rate for nights and weekends.  The same person or couple mentioned above will pay $5 for a 3 hour trip, regardless of whether it is during meter enforcement.  Total cost ~$9, twenty cents more one dollar less than a three hour stay at a parking meter before 7 [In February 2016, downtown meter rates in Portland were raised to $2.00/hour, enforcement hours were unchanged].

Public transportation is next on our list.  It has its benefits, no concerns about driving drunk, you can, legally,  read or text en route, you don’t have to look for parking.  But you need to walk to the transit center or bus stop.  You need to allow extra time for catching the line and for possible delays.  You have to share space with other people and potentially stand.  You will probably have to walk to your destination and all the same things apply to your return trip (assuming Trimet is still operating that late).  Bus schedules are rarely aligned with social schedules, so you will likely have to arrive early or arrive late and you may spend some time waiting for a transfer.  Trimet fees are charged at all hours of the day.  A single person going downtown for a movie and meal will need to buy a day pass for $5.  Additional travelers pay full fare, so date night will cost a couple $10 in public transportation fares (and they’ll have to leave for home around midnight).

Person power is, by some measures, the least convenient way to travel.  You must contend with the weather and with distracted drivers.  Bike parking can be, at times, more frustrating than car parking and rates of theft are higher.  A cyclist has no secure location to store bags or coats.  Transit time is likely longer.  Walking takes even longer and may be impractical for most trips.  The cost, however, is (currently) free and you can leave whenever you want and arrive very close to your destination.

Transit Fares and Parking Rates

As you can see, the currently policy of the city of Portland encourages the “rational person” of economic lore to drive themselves to their location and to park on the street near the business.  The second most convenient, and therefore valuable,non-active mode of transportation is often cheaper than all other non-active modes!

Parking on the street should cost more than parking in a garage and parking in a garage should cost more than taking the bus [In February 2016 downtown meter rates increased to $2.00/hour, but hours of enforcement still end at 7pm, SmartPark charges 24 hours a day]

The problem is even more pronounced when you take families into consideration.   Suppose a family of 4 (two adults and two children) who live at Orenco Station would like to go to the zoo, should they drive or take the MAX?  Driving, the ~11 mile trip will cost ~$5 (but much of that is sunk cost so it will feel “free”), for a 3 hour trip parking will cost $4.80 (unless the trip is between October and March and then it will be $4), for a total cost of $9-9.80.  The trip should take about 30 minutes each way.

The same family taking the MAX will need to pay $15 in transit pass fees (children are 1/2 price) and the trip will take about an hour each way.

Why would any rational person take the MAX in this scenario?  A family either needs to have a strong environmental ethic, a deep dislike for driving, or a disability/conviction that prevents them from driving to make this choice rationally.

Fringe Benefits

Portland isn’t the only government providing an incentive to drive.  The federal government’s fringe benefit tax policy also encourages driving above all other modes.

Employers can provide tax-free benefits to employees for commuting.

They can provide up to $250 per month in parking permits or reimbursements.

They can provide an additional $130 a month for transit passes.

They can provide, to the exclusion of the other two benefits, $20 a month for the purchase or repair of a bicycle.

They cannot provide a tax-free “cash out” of the parking or transit benefit for employees who choose to walk or bike to work.

By not requiring a cash option for these benefits, the federal government is subsidizing and directly encouraging driving over all other modes of transportation.  This is a policy at direct odds with the goals of the state of Oregon and the city of Portland.

So what can we do?

The Central City Parking Policy Stakeholder Advisory Committee has made a recommendation to the City of Portland to raise on-street parking meter rates to $2.00/hour.  This $0.40 increase will make the parking for 3 hour stay downtown (during enforcement) cost more than an equivalent transit trip for one person.  The policy will also price the more convenient and valuable street parking appropriately compared to Smart Park rates. [Mission Accomplished]

The committee is also likely to recommend that city council set a policy to adjust meter rates based on utilization and for the PBOT to coordinate on-street and garage rates more effectively.

Enforcement hours are set by the city council and it is unclear if the committee will recommend that they be extended or reduced by the director of PBOT.  “Free” parking after 7PM completely inverts the economics of evening travel.  Congested on-street parking during entertainment hours leads to air pollution, safety hazards, and loss of business.

City Council is likely to be skeptical of giving away their power to set rates and hours.  They are likely to feel sympathetic to (false) concerns that performance pricing and extended hours will lead to less business or adversely affect low-wage workers.  We should demand that the city collect data on low-wage workers parking downtown and pursue mitigation strategies that do not overwhelmingly benefit affluent commuters and patrons of downtown businesses (namely cheap or free parking).

Extensions of Trimet service hours, subsidies and/or reductions in Trimet fares are critically needed.  The city and federal government could also require equivalence in benefits for active modes of transportation and driving.  Even better would be to end parking subsidies for employees.

5 Responses to “Perverse Incentives: Transit fares, parking rates, and fringe benefits.

  • “The same 4 mile round trip will cost roughly $4 in vehicle wear, gas, etc” – shouldn’t that be significantly lower if you assume auto ownership? I think AAA puts marginal mileage cost at 20 cents or so.

    • I went with fairly conservative numbers from the AAA assuming a relatively low-use vehicle makes the price go up.

      In reality, of course, few drivers consider the actual per-mile cost other than gas and parking, but intuitively they would feel that if you are maintaining a car you might as well use it as much as possible. An average driver MIGHT consider the cost of gas on their way to the zoo or downtown (particularly if they have to fill up), but the cost of parking is probably what they’ll compare it to in the end.

      • AAA’s 2015 estimates for operating cost per mile is 14.54 cents:

        That includes 9.18 cents gas, 4.68 cents mileage-related maintenance and 0.68 cents tire wear. Doesn’t include fixed costs like insurance, license, registration, taxes, depreciation and financing. (AAA says depreciation is by far the biggest single cost of car ownership, but I was surprised to learn that they don’t think depreciation varies more than a few hundred bucks a year tops based on how much a car is driven.)

        All of this is to explain why I’m going to use the 14.54 cent figure when I appropriate this post with credit for BikePortland today.

  • Is the street parking available at those $1.60 rates? If not, then it should be raised for that reason. If not, then they should not be.

    But… the long term move is to allow parking spaces, whether on-street or off, to be converted to other uses. Given that revenue per square foot for parking is a lot lower than for other uses, the barrier isn’t economic, it’s political. You make more money by providing less parking, if the law lets you. If you think you have too much parking, make it easier to change parking to other uses.

    At the very least, on-street spots ought to be available for lease for any sensible use, at the rate at which they generate revenue (eg, $3000 a year). Fewer spots drives prices higher for remaining spots. Alternately, the city can look at taking a loss on revenue from a spot in return for building a public asset, like a bike lane.

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